Fare pricing undercut strategy?

[kcclieou]

Hi,

Over the past couple of days I have been facing severe competition in two of my four bases. Each time the competitior lowers the fare by $1 or $2, which immediately causes my loadfactor of that route to drop from 100% to 90% or even below. To regain a loadfactor of 100% (I usually do this only when the loadfactor drops below 90% or when the route had been edited on the same day), I find that reducing the fare by $1 or $2 is usually sufficient.

But I find it time-consuming and sometimes annoying to have to do this once every hour. Decreasing the fare by $5 (or even $10, say) would widen the gap much more quickly, but it would decrease my profit (at least in the short run). Would such a strategy be able to lower the loadfactor of competing airlines more than if I decrease the fare by just $1? Would it be more effective in lowering the profit of competing airlines (or, to even drive them out of the market)?

[gisa]

Greetings,


This is one of the most time consuming parts of AM, but it is part of the game!

If I were you, I would lower the fare by 1 or 2 Euros to regain 100% loadfactor.  To be honest, having a load factor of 100% in your fleet becomes impossible and unnecessary the larger you get.  When you first start out, it's very important as you need all the money you can get, but your airline (will hopefully) get to a point where you bring in so much money that it won't matter if your average loadfactor is 90%.  Plus, you won't have the time to edit 200 + routes to get to 100% and even if you did, you'd have to go back and edit them again shortly after.

Simply put, no player has the time to edit all their routes to get a 100% loadfactor.  You can try to edit the one's that are very small however (say less than 75%).  Again, in the beginning, when you don't have as many planes or a high DOC, it's more important to edit it but as time goes on, it becomes less important (unless of course you are logged in and playing AM 24 hours a day non-stop!).  The players here who do that scare me...

You can drop the fares by a significant amount, but that might affect your competition in a negative way.  They might decide to *up the ante* by increasing frequencies or dropping it even further in retaliation.  I consider it *the politest way of trying to share while getting 100%* if you lower it by just the amount necessary to get 100% (while you fight for the 100% you are still making the most possible).

It's unlikely you'll drive a competitor out of a market by lowering your fares by that much.  Some players like me have no problems running a plane that pulls in a very small amount just to make a point.  Some even run planes that lose money just out of spite.  We are human after all!

Maybe the best advice is to try to stay *under* the pack for the longest time possible.

Let's say you have 8 competitors (I will make up somewhat fictional plane names)

a boeing 707 - $ 120
b caravelle - $ 185
c caravelle - $ 185
d caravelle - $ 185
e caravelle - $ 187
f caravelle - $ 190
g caravelle - $ 193 (you)
h skyvan - $ 642
i bushmaster - $ 665

You can edit the route to 190, 189.99 if you want, but sometimes it might be worth your while to edit it to 187, 186.99 or even 185 or 184.99.  You will lose more potential profit (not all that much really) but you won't have to edit that route as much because you are *under the pack*.  If you edit it to 190/189.99, you might get 100% loadfactor, but because you are in the higher tier it means you'll have to adjust it again very soon (the competition in the higher tiers adjusts their fares more regularly since they are the most affected).

Hope this helps...

Gisa ^^

[wavif]

Simply put, no player has the time to edit all their routes to get a 100% loadfactor. 

I know a exception ... a rival always has 100% loadfactor either he has nolife or he is cheating 

[MAXAir]

I would definitely stick to the 1 or 2 euro at a time strategy.  If you do more than that it just becomes a race to the bottom.  Even at 90% loadfactor you're still making a good bit of money on the route.  I don't even worry about my routes until they get below 75 or 80%. 

[pseudoswede]

Minimum price I drop fares is 5.

A competitor will often start out by dropping fares by 1 or 0.01. I continue to drop it by 5. Sometimes, they get the idea and will start dropping their fare by 5.

If the genius doesn't get it and continues to drop it by 1 or 0.01, I'll drop it by 25.

[NorthSky Airlines]

I have a average load factor of 100%, and I got 103 routes

Luckily, this is a private world, so it is only competition on some of the "Excellent" routes. Even then, I can have a higher price (with the same plane) and still have 100 %

I think the compeditor also have 100 % because he aint doing anything about it

[pck]

just too add: what happens if you end up at 1 Euro? I normally just pull out. But I think this situation would never happen unless if it wasnt multiworlds

[Cheung Airlines]

* Cheung Airlines remembers pre-MW HKG - CAN..... You got 737s, DC-9s, DC-10s, IL-98s, even 747s all cramped into the same route and same price.....   

[ATE24]

If the genius doesn't get it and continues to drop it by 1 or 0.01, I'll drop it by 25.

Most probably it will end up that your competitor will find a equilibrium point which the fare is higher than you while keeping 100% for both of you...

Is it a way to co-exist peacefully? I don't know, at least I'm not going to drop by 25, but at most 5.

[CHR]

Most of the time I just round my fares to the nearest €50. Occasionally, if it is 95% LF or so, I might round to €25. I means you aren't affected by everyone else dropping their fares by €1 at a time.

[XeniaAirways]

LAX-SFO was a pain... I had to update the are multiple times each real life day... fare quickly dropped from 100 euros when I entered the market to 23 euros before I pulled out from the losses...

There really is no legal way to avoid this issue... you just have to hope that as you drop your fare, your competitors, who may be operating less efficient aircraft, will wisen up and pull out of the market.  I flew a high-cost Boeing 727 on that route, so I ended up pulling out earlier, but if you flew a more efficient aircraft, I'm sure you could still make money with those conditions.

That's the reason I tend to enjoy operating out of secondary airports... then you deal with 3 major competitors (CVG) at your hub instead of 9 (SFO).